Predictions

fibeReality Prognostications

Acacia’s Bridge Too Far, October 30, 2016

“We would not be surprised to see Ciena introduce WaveLogic 4 soon.”

The next day Ciena announced WaveLogic Ai, its fourth generation.

Acacia’s Valuation: The Street’s Cruel Joke, August, 2016

“While Acacia Communications’ recent business performance has been impressive, and deserves to be rewarded, there can be no justification for [its] market cap….At a minimum, the negative consequences this time will result in dramatically skewing the value assessments of Acacia’s competitors and other players in the space.”

In early September 2016, a prominent investment firm downgraded Ciena based on “valuation” despite no legitimate justification for its market cap being about a billion dollars lower than Acacia.

Infinera’s PIC Challenge, January, 2016

“[W]hile the necessity for 64QAM is terribly far out into the future, we think it is possible that a plateau has been hit with Infinera not being able to go beyond 8QAM and 16QAM with Indium Phosphide-based componentry to achieve a single 400G channel or a 1-terabit PIC….”

Even when Infinera announced its substantially higher capacity 2.4 terabit PIC in March, 2016, it specified 16QAM.

Verizon’s Potential Colossal Blunder, November, 2015

“If a recent Reuters’ article is correct at all about Verizon considering the sale of its enterprise business (which the operator has called “speculative” and “baseless”), we anticipate that by the service provider pulling the trigger on such a strategy, it would go down as one of the biggest mistakes in corporate history. No other portion of the country has even close to as many Fortune 1000 customers actually based in its incumbent territory. While it may make sense to take less aggressive actions, such as the divestment of its data center business, there is no adequate value that can placed on, in effect, ridding itself of serving these large companies….It is curious that Verizon waited several days to respond to the story put out by the historically reliable news organization, and not right away because one would think that the carrier would want to alleviate customer concerns immediately. Reuters also talked specifically about an advisory company and a former interested buyer. At the very least, Verizon appeared interested in the industry’s reaction to the piece.

In February 2016, there was an announcement of Verizon’s purchase of XO Communications’ fiber business, a very strong indication of the company’s commitment to serving enterprises with landline communications. In addition, in the previous month, there were reports of Verizon selling its data center assets.

Reactions to Ciena Based on Elusive Credibility Factor?, December, 2015

“[I]n the earnings transcript, Ciena provided a rundown on the DCI vendors. ADVA Optical Networking should have probably been included as one of the “key players” – and of course, with the transition to OLS, certain components suppliers may get into the mix as well.”

On the first point, ADVA’s percentage of its sales in DCI about doubled the following year and on the second, Infinera announced an OLS partnership agreement with Lumentum Holdings.

Optical Line Interoperability Illusion, October, 2015

We expressed our reservations last October over the OLS approach, particularly involving the older users.

Verizon’s Director of Optical Transport Network Architecture, Design and Planning, Glenn Wellbrock, did not mince his words at OFC 2016 on the matter of the pitfalls associated with this kind of disaggregation. He more than implied that OLS entailed the risk of blowing up the network based on the uncertainties associated with maintaining adequate long-term performance and reliability.

Avago’s Spinoff of Optics in Short Term,? August, 2015

“As a bare minimum, the vendor would most likely be interested in ridding itself of many of its own devices under its current heading, “fiber optics,” within its present category of “wired infrastructure.” They are the wide variety of transceivers in such markets as Ethernet, high performance computing, and metro networking – the vast majority of which in the first two categories run on multimode fiber, along with a handful on copper.”

It became clear very quickly that a very vague press release put out by Foxconn in Chinese on purchasing machinery really meant that it had bought Avago’s module business. In fact, fibeReality was the first news source in the world to point out the connection.

Ciena’s Last Chance to Fulfill Its Destiny, August, 2015

“Nokia’s purchase of Alcatel-Lucent means that Ciena’s position particularly in the US market has been strengthened (at least one big carrier in the States wants as little to do with Nokia as possible)….”

In a 10/26/15 Light Reading post, “We think Verizon intends to abandon Alcatel-Lucent as a second source for its long-haul network and focus future investments toward sole-sourced Ciena,” states the analyst (Simon Leopold from Raymond James Financial) in a research note….”

To Infinera: Let Transmode Run as Freely as Possible, June, 2015

“Infinera would be better off allowing Transmode Systems to operate as an independent division than to integrate it much into its own corporation….By leaving Transmode more or less alone, Infinera will avoid messing up a cash cow that could easily remain an entity unto itself….Most vitally, the hope should be that with Transmode able to do its own thing, a good amount of the technical talent, who have been focussed on the metro from the bottom up right from the beginning, might remain with the vendor indefinitely.”

According to an 8/14/15 Light Reading article, “‘We’re buying this company for revenue synergies, not cost synergies,’ [Infinera, CEO,] Fallon said….Upon [acquisition] completion, Transmode CEO Karl Thedeen will become the managing director of Infinera’s new Metro Business Group, which will include both the Transmode operations and Infinera’s own fledgling metro assets…. ‘Karl will decide what we carry forward, and he will be held accountable to win in the metro,’ Fallon said. ‘We’re not going to tell him what he can and can’t do to go do that….'” Although it has become clear that Infinera had no intention of truly putting the Transmode operation in charge of the metro business, at least the deal could not be closed without the stipulation.

400GbE Spectacular Fantasy, April, 2015

“As more time goes by, we hope there will be a greater sense of inevitability to developing a standard that would have a greater level of rationality – like 200GbE – in terms of getting to a data rate that would be closer in terms of the timing of available technology to construct something that at least has the appearance of being authentic.”

A study group for 200GbE was established by the IEEE soon afterward.

New Title II Will Choke Optical Investment, February, 2015

“The logical presumption associated with the madness of the FCC’s planned takeover of the Internet will be that service providers should be expected to cut back on fiber optic network investment to an absolute minimum, at least until litigation in the courts has been completed.”

According to Dr. Hal Singer, “…[For] those [ISPs] investing at least $300 million in the first nine months of 2014—for the nine-month period ending in September 2014 (the pre-Title II era) with the nine-month period ending in September 2015 (the Title II era)…, [o]n net, capex fell by a staggering $2.9 billion across the largest ISPs excluding Sprint, T-Mobile, and US Cellular (the pure wireless ISPs). Including the pure wireless ISPs still results in an aggregate decline of nearly $2 billion relative to the same period in the pre-Title era….Critically, the nearly four percent decline in ISP capex in the Title II era is highly abnormal since the end of Great Recession. According to USTelecom, broadband capex increased every year since 2009. Indeed, broadband capex increased by nearly 10 and 3 percent in 2013 and 2014, respectively.,11/5/15, view link

Absurdity of Stressing Metro 100G Now, January, 2015

“A couple of financial analysts have been touting Ciena as the expected big winner for a future contract for a large 100G metro project at Verizon. While there can be little doubt that the vendor would be part of such a deal, it needs to always be remembered that these announced agreements never compel the service provider to buy one dime from any supplier, and so the actual amount of equipment purchased could be far less than initially indicated.”

Later, Verizon made it clear that Ciena’s actual split of the contract is yet to be determined.

In October, 2014, we wrote several articles about the coming “Integrated Photonics Manufacturing Institute,” which was later called the “American Institute for Manufacturing Integrated Photonics (AIM Photonics)

[L]ook for stipulations…that might include exorbitant entry fees and “[there is the] logical assumption that corporations will be reluctant to…share proprietary technology.”

By February, 2016, a lot of grumbling could be heard about AIM. One company that wanted to join the consortium was asked to contribute $1 million, along with its packaging IP, and then it was supposed to teach AIM how to practice its IP, so it could be used for the benefit of its other members. Of course, the firm did not sign up.

Silicon Photonics: Widespread Usage on Active Components Doubtful, September, 2014

“While the amount of industry chatter about silicon photonics rose substantially in 2014, partially because of certain market research firms looking to sell more reports, the technological hurdles, especially with insertion loss, make extensive use of active, combined components, such as for modulators and photodetectors, unlikely in the foreseeable future. Although there have definitely been numerous demonstrations of integrating with these CMOS fabrication processes, like with receivers, both the performance and cost are superior with standard methods.”

Criticism of silicon photonics soon became mainstream.

 

Past Prognostications

100 Gig: Is market expectation in need of a reality check?, 7/27/11

“100G is not going to kill 40G and, if anything, we are bullish about 40G….I’m not talking about large volume ramp-up of 40G but there is arguably a ramp-up.”

Since the beginning of 40G’s arrival, there had been a consistent mantra in the telecom space that 40G is either dead or dying; even in 2014, while there had been acknowledgement of its continued good health by vendors, there tended to remain the persistent and unfounded knee-jerk follow-up that the data rate would start declining soon. Given the tremendous spurt upward of 40GbE in 2015, even we arguably wound up being low on expectations.

Comment on Qualcomm Updates on India Exit Plan, 11/10/10

“It is really more about science than about opinions. Clearwire has definitely found some technical limitations with WiMAX.”

Sprint eventually announced that it will shut down the WiMAX network by the end of 2015.

Comment on Vodafone Updates Strategy, Profit Outlook, 11/9/10

“With wireless driving so much of its future revenues, Verizon has been adamant about buying Vodafone’s share. ‘Pledg[ing] to get more out of its assets in which it does not have majority control’ ultimately means selling the assets to Verizon.”

Announcement made less than a year later.

BBWF 2010: Optical Observations, 10/29/10

Look for nx10G muxponders being predominant for 100G for a very long time on the public network side.”

Serial 100G still lags far behind.

Cisco Systems’ coherent power move, 9/21/10

“There are also players such as Finisar that has yet to detail their [100Gbps line-side optics] plans. Lutkowitz believes that if Finisar is holding off developing 100Gbps coherent modules, it may prove a wise move given the continuing strength of the 10Gbps DWDM market.”

Despite its strong position in the optical components space, in June, 2015, Finisar’s sales of 100G still represented less than 10 percent of its revenues.

“Nortelization” of Ciena Seems Inevitable, According to Telecom Pragmatics, 4/26/10

“Over the last several years, former Nortel executives have slowly worked their way into the Ciena organizational structure….They appeared to have taken charge a while before the acquisition of the Nortel fiber optic assets….”

The culture changed very substantially with the Nortel MEN acquisition. For example, it seems clear that at as a result of the “Nortelization” of Ciena, the supplier moved from a just-in-time business model to one very much based on backlogs in which the recognition of large amounts of revenue can be substantially stretched out for occasionally undetermined durations. In addition, the ex-Nortel people constructed fiefdoms to protect their own interests at the expense of the legacy Ciena workers.

Google’s Fiber for Communities Will Probably Be Token Effort, 4/19/10

“The Google Broadband for Communities initiative needs to be kept in perspective….This effort is another example of encouraging the industry to build cost-effecitve access to the cloud….There continues to be a lot of misunderstanding about Google’s objective in making investments in networks. It does not want to get into the public networking business.”

Google has fallen short of expectations with FTTH both then and in the present.

Principal Broadband Stimulus Winners Likely to be the Three Cs: Contractors, Corning, and Calix, 3/7/09

At the time, there was a vocal crowd for wireless getting the dominant portion of the awards.

Will Qwest shed its long-haul network? Potential sale could allow company to get in touch with local roots, 4/10/09, Telecommunications International

“[He] believes that the EMBARQ/CenturyTel marriage is a sign of things to come….‘It’s a natural occurrence that has happened across the board with CLECs and then RBOCs, so it’s inevitable that it will happen with the independent telephone companies….This is the first of many mergers going forward.’”

Since that time consolidation of tier 2 and 3 incumbent local exchange carriers has been happening at a healthy clip.

Santa Barbara’s Occam Networks expanding broadband technology, 1/06/09

“‘Occam’s got a rough road ahead,’ [he] said. He suggests that the best option for Occam is to be bought by another company….[The CEO] said Occam is not considering a sale.”

In fewer than two years, Calix announced it purchased Occam.

Verizon’s Clever Corridor Play, 03/21/06, IT Business Edge

“[Q]uietly, the cable companies are looking at fiber to the home themselves.”

Five months later, The Wall Street Journal obtained a secret study by CableLabs that did not rule out the use of FTTH in the future.

Fiber-to-the-Business continues to be Main Preoccupation at Verizon….Subsidizing costly Fiber-To-The-Home (FTTH) Activities, 3/14/06

Dismantlement of FiOS started in 2015 with the sale of FTTH lines in three large states.

Start-Up Claims Quantum Leap In Fiber Optics for Telecom Gear, 5/26/05

“‘It’s a very safe bet that [Infinera] is a company that’s going to make it one way or another….’”

Despite some ups and downs over the years, the start-up became well-established in the space.

Tellabs: Alcatel’s Silent Partner at Sprint? 2/12/03

“…Tellabs not only won Sprint’s metro DWDM RFP along with Alcatel, but that the award was likely to open the way for Tellabs to make inroads at Verizon Communications Inc….”

Announcement of Tellabs 7100 installations at Verizon in June 2006.

Xtera buys Metro-Optix assets, 9/2/03, Connected Planet

“[Although he] generally regards Xtera executives as well-grounded and practical, [he] was skeptical of the strategy. ‘I can’t imagine why they’d want to diversify all of a sudden and get into the metro….That’s a very competitive space. When the market comes back, I’m not sure the Metro-Optix box will be considered optimal. Companies will be announcing products with much greater density that are cheaper. It won’t be very long before the Metro-Optix box is going to be looked upon as not being state of the art….’”

Subsequently, Xtera exited the metro space.

Ciena to Acquire WaveSmith Networks; Deal to Give the Firm 7 More Customers, 4/10/03

“‘I didn’t even think the original investment [in WaveSmith] was a good idea, because it takes away from their core business.’”

Relatively little business resulted from the WaveSmith acquisition.

Tellium Lawsuits Allege Rigged IPO, 1/2/03

“…[P]ublished a research note in the spring of 2001 (before Tellium’s IPO), predicting that the company would be forced to exit the optical switching market within six months to a year, due to a lack of carrier demand.”

Related to 5/18/01 prognostication.

Cisco launches ONS 15600 for metro aggregation, switching, 1/1/03

“‘If they really want to maintain their position as a next-generation SONET ADM box leader, they have to come out with a brand new ADM device or perhaps buy one of the companies that might be available that does have a newer type system.’”

Cisco later developed a 6-line card chassis for its ADM.

Ciena’s K2: What Problems?, 9/17/02

“‘The K2’s not stellar….It was always a ‘me too’ kind of product. Nothing differentiates it. Ciena needs to get its burn rate down and focus on products that will do the most for them….’


Ciena discontinued the K2.

Cisco Launches Metro Switch 9/16/02

“‘It’s very God-box-like….It should be more simple. The Cerent box was like that.’”

Cisco discontinued the ONS 15600.

Ciena Sheds One-Fifth of Workforce, 3/27/02

“He said Ciena’s main problem isn’t so much the economy or its customers as its apparent lack of focus. Last week, Ciena participated in a $40 million investment in Equipe Communications Corp…, a move [he] called completely illogical because Equipe uses technology that has nothing to do with Ciena’s main business….”

Equipe was later dropped.

Nortel’s HDX: The Future Under Fire, 2/27/02

“Service providers I’ve talked to say there is a huge problem with the cost and size of the [HDX] box. I don’t see any of them deploying it in any big way….”

The HDX was a bust.

What’s Next for Kestrel?, 2/15/02

“‘I think the handwriting was on the wall for FDM in the heyday of optical fever….’ Despite Kestrel’s assertions that its product is more attractive than ever to companies looking to save costs, he isn’t convinced that carriers have seen its value proposition. If Kestrel and its chief rival, Centerpoint Broadband Technologies Inc., didn’t take off when carriers had money to spend, there’s no indication they will do so now, he says.”

Although it will be a very long time before the industry goes beyond 100G in a big way, FDM will finally play a vital role in the optical sector.

Alcatel, Nortel Flesh Out Optical Product Portfolios, 1/28/02

“‘I don’t know why Alcatel would buy [Astral Point]….[Vendors] can barely do two different functions, and once you go above that, you are really asking for trouble. Instead of retrenching and making things simpler, they make it more complex.’”

Although Alcatel-Lucent continues to have remnants of the solution, objectively speaking, it was hardly a stellar pickup.

It’s Not Smart To Play ‘god’ With Network Equipment, 1/14/02

“’[M]ost companies are wasting their time even pursuing the “god box” concept, he says….There’s this hype about bringing in extra functionality to boxes that goes way back, and it never happens….’”

It is common knowledge today that in general, a Swiss Army knife approach should be avoided in public networks

Nortel pins hopes on optics switch, 10/16/01, The Globe and Mail

“…[H]e’s skeptical about Nortel’s commitment to the [cross-connect switch] market and the company’s ability to meet the 2002 release deadline.”

The company did not meet the year-end 2001 promised date for availability of the product.

Report Stirs Ethernet vs Sonet Debate, 8/22/01

“…Both say they agree that Sonet will continue to dominate the metro for at least the next three to five years.

‘This is probably the first time that I can say that I agree with [The ]Yankee [Group]….The rate at which Sonet gear becomes obsolete is very slow. That stuff will be around for another 30 years. There’s no question that Sonet is here to stay.”’

SONET remains fairly prevalent in networks today.

AT&T steps in with orders to cushion loss of Verizon, 8/27/01

“He quotes a close industry source as saying that AT&T was seeking a device such as CoreDirector for its network….Sprint also buys CoreDirector units for its systems abroad, and it is satisfied with the performance of those switches, he says…”

Announcements for AT&T and Sprint’s international traffic in February, 2002 and July, 2002, respectively

TeraBurst enters optical-switch fray with millimeter wave technology, 8/1/01

“Proving [TeraBurst] to carriers and service providers may not be an easy task…because service providers may have ‘a [present] bias against analog technology. There was a company a while back called Silk Road that used analog technology and nobody could figure out the patents.”

TeraBurst ceased to exist.

Testing the waves, 6/18/01

“’‘As the price of long distance nears zero, interexchange carriers may ultimately conclude that OPM devices are more of a luxury than a necessity….Cost is the key issue….’ [He] predicts that the market will be worth $20 million this year and reach $190 million by 2004. Until service providers start turning up hundreds of wavelengths in their DWDM networks, he adds, OPM devices will likely be a solution in search of a problem.”

Indeed, a strong argument could be made that such a critical mass of channels was necessary in that in 2005, a good number of the ROADMs had an optical performance monitor on each wavelength.

Tellium holds successful IPO, Connected Planet, 5/18/01,

“‘Tellium’s [A]urora optical switch only grooms down to OC-48. What are needed…are optical switches with more granular grooming capabilities, such as the CoreDirector from Ciena….’ The success of Tellium’s IPO…might be the fact that the Ciena CoreDirector is doing so well. [Tellium’s product] fits in that space, but it’s lacking capability.’

Tellium’s switch never got off the ground – the company was acquired by Zhone Technologies mainly because Tellium had a lot of cash.

Optisphere’s Spielvogel Speaks American, 2/28/01

“‘In general, Siemens has had plenty of time to crack the U.S. market….But it’s much harder to stay focused and execute quickly when you’ve got to call Germany for every move….Let’s just say I don’t see Optisphere becoming a big American powerhouse.’”

In the future, Siemens got together on the transport side with Nokia to form NSN, which later became part of Coriant; Optisphere was brought back into Siemens shortly after this article was published.

Nortel shortfall: Moment of truth for investors, 2/26/01

“‘Ciena is going to be kicking everyone’s [butt] with this CoreDirector.’”

Ciena now pretty much owns the optical cross-connect market.

Defeating Dispersion, 11/27/00, Connected Planet

“…[B]elieves it is going to take at least five years for OC-768 to become commercially viable….‘Every fiber in my being tells me it’s not going to happen for a very long time.’”

It took a few more years beyond the projection for 40G to make its arrival, but at first it was an artificial creation by Cisco Systems with its router ports.

Lucent Technologies loses its grip in a hotly competitive market, 10/9/00

“[Lucent is] very much in danger of becoming a non-entity…..You can only have so many powerhouses. Where does Lucent fit into all this?”

Since that time, It is fair to say that despite a few promising signs, Lucent as an entire entity had no other choice but to ultimately join with Alcatel years later.

Ciena Says Earnings May Drop Sharply, 9/26/00

“‘You’ve got to wonder whether this is the tip of the iceberg’ of carriers facing financial troubles. Internet carriers face a lot of competition to provide products and services nearly free, ‘at the same time they are spending millions and millions of dollars on the infrastructure….’ [Ciena] remains “very solid in the long term….’ It also means Ciena will be ‘going to carriers with firmer [financial] ground.’”

Ciena eventually became one of the strongest optical players in the market.

Procket Processes a Dream Team, 9/25/00

“The membership of its Procket’s board of directors and advisory board is another eyecatcher. It reads like a “who’s who” of broadband networking….But observers think the proof will be in the pudding. A great marquee does not a product make. And as for advisory boards: ‘They’re great for PR and stock options. But I’m not sure how much they actually contribute to product development….’”

Cisco later bought Procket’s assets for a song.

Have tech investors had too much fiber?, 9/25/00

“‘People have been throwing money in without discretion….Within a year there will be a major, major fiber-optic correction. … Some of these carriers could go belly up.’”

The bubble bursting turned out to be imminent.

Corvis-Sycamore Battle Looms, 6/16/00

“One analyst points out that the long-haul DWDM optical gear is still in its early stages, and the startups are marketing products that aren’t likely to come into their own until later this year or next. ‘We’ve found only six carriers that do OC-192 speeds. It’s not economically viable for them yet. When they get enough traffic to go OC-192, who will they pick?’ That means that Corvis still has time to complete its product and get to market….Other experts note that most of the shares of optical startups have been bid up largely due to speculation about future market development….Lutkowitz stresses the dominance of Nortel in the current high-speed OC-192 market, and he believes that many investors have been overly optimistic about the speed at which carriers deploy next-generation equipment. ‘You can’t over-estimate how slowly things really move in the public network arena….’”

Nortel remained the dominant 10G SONET player and nothing further has to be said on the rest.

Brooke Southall; Business Writer, 3/1/00, The Business Record (Baltimore)

…[F]rom Wall Street’s perspective, Ciena has the advantage because its equipment is just coming of age, whereas Tellabs’ could become obsolete — replaced by the kinds of optical-networking equipment sold by Ciena and other firms. [’]Tellabs isn’t exactly selling Edsels, however….They’ll be able to milk that cross-connects market for years to come.”

Tellabs’ TITAN remained a cash cow for a lengthy period.

Nortel Buys Xros In An All-Optical Bid, March 2000

“…Hybrid optical/ electronic switches, which enable carriers to examine and monitor traffic as it passes over optical pipes, will be much more popular among carriers for the next few years.”

Xros was a flop and the public network has still not installed all-optical switches in any meaningful way.

Briefs from Wilmington, Linthicum, 12/8/99, Associated Press Newswires

“[H]e visited Qwest in August and was told its engineers indicated they were leaning toward offering Ciena a large portion of their company’s optical-networking business.”

Ciena was announced as a major vendor for its optical network in May, 2000.

Brooke Southall; Business Writer, 11/10/99, The Business Record (Baltimore)

“[A]n analyst…who has proven remarkably prescient through good and bad for Ciena, said he believes the Qwest rumor rings true” (see AP article just above)

Playing the optical card: Redback grabs Siara in continuing buying spree, 12/6/99

“Despite the hefty prices optical companies command in acquisitions and on Wall Street, the optical frenzy may reflect a new trend in the industry. ‘This is something we didn’t even see two years ago….Carriers are so desperate to get [to market first] that they set up relationships with companies that don’t even have a finished product yet.”

A foreshadowing of pre-IPO shenanigans between vendors and buyers in general

Brooke Southall; Business Writer, 11/10/99, The Daily Record (Baltimore)

“‘The guys at Lightera are kicking themselves….Ciena got Lightera for a song [less than a $1 billion]. You’re talking about a multibillion-dollar valuation.’”

It is fair to say that Ciena has and will continue to receive a gigantic return on this investment.

Access etiquette, 11/8/99

“AFC is a likely acquisition candidate because of its product suite, partnerships and recent management changes….”

AFC was later picked up by Tellabs.

One-Year-Old Columbia Company Plots Telecom Revolution; Ready for Optical, 5/22/99, The Daily Record (Baltimore)

“[He] said Huber may be getting ahead of himself this time. He said that Ciena, with its dense wavelength division multiplexing equipment, sells a big Band-Aid for existing networks that need an overnight mega-boost in fiber-optic capacity. That’s an easy sell. But purchasing an all-optical network requires a carrier to complete a paradigm shift in thinking. ‘[Corvis] may be confusing the market and confusing themselves….Is it conceivable [Corvis could complete a paradigm shift]? Yes. Is it going to work? Probably not. To make the leap to an all-optical network is probably too hard and unrealistic.’”

Corvis bought a couple of carriers and got absorbed by Level 3, ceasing to be an equipment supplier.

ADVA Launches WDM Platform For Enterprises, 5/3/99, Fiber Optics News

““There aren’t that many companies in the market playing in the enterprise WDM side….For the most part, it’s [IBM] and ADVA selling into the private enterprise market. Both companies have done a good job meeting the price points they need to with their products. The price points are more suited for the market than those companies trying to sell into the public network metro WDM market. Both companies should do well.’”

While IBM sold off its WDM business, ADVA continues to be a prominent player in the market.

Unimpressive Profits Highly Probable in WDM Equipment Market, May 1999

“According to a new study…, the WDM market represents a combination of the worst attributes of an emerging business with high development and manufacturing costs along with the characteristics of a mature, commodity-like market with extraordinary price pressures. Consequently, profit margins for just the WDM equipment itself are likely to become unimpressive shortly for suppliers, if they are not very low or nonexistent already. While all of the IXCs are looking to extract every cent of unnecessary cost out of the networks, the demand for bandwidth is increasing. Rising production and research and development costs for the suppliers go hand and hand with higher channel costs. Moreover, some IXCs want to stay on the cutting edge with other functions associated with the WDM products. The catch is that while the suppliers are providing more capacity and enhanced features, they have to reduce the price to be competitive.”

With some notable exceptions over time, such as Nortel supplying a closed SONET/WDM system as well as niche players going after non-Tier 1 customers, all in all, WDM alone has been notorious for being a low-margin business.

Are Two Md. Tech Firms in Play? Manugistics, Ciena Up on Wall Street as Merger Talk Grows, 1/15/99, The Daily Record (Baltimore)

“[O]ne analyst finds no basis for the rumor that the Linthicum- based maker of telecommunications equipment will be sold soon.‘I thinks it’s crazy….I believe Patrick Nettles when he says they want to go on their own for a while.’”

Of course, Ciena remains an independent company to this day.

Rapid Entry Into Metro DWDM Space Drives Nortel to Buy Cambrian for $300 Million, 12/18/98

“‘I think if you had to pick a supplier, that’s the one to go for,” he continues, explaining that Cambrian seems to be furthest along with DWDM survivable ring capability.’”

Ultimately, the Cambrian solution established the basis for Nortel’s future metro optical product line.

Nortel Buys Cambrian, Picks Up Metro WDM Solution, 11/21/98

“‘The next big opportunity in WDM is metro business solutions….This is true especially in the United States, but it will occur slowly. I am not convinced that costs are currently low enough for carriers to deploy WDM in the local loop. And not all companies have fiber in the enterprise. In long-haul networks, WDM worked well because it was expensive for carriers to put in fiber. In the local loop, businesses have alternatives to fiber.’”

A prediction that remained true well into the following decade

Ciena Merger Gets New Life, If Only for Day Tellabs CEO Birck Calls Firm ‘Attractive’ on TV, Fueling 30 Percent Stock Rise on Merger Hope, 10/20/98, The Daily Record (Baltimore)

“[He]…said he has seen Ciena getting some very good news, which the company has not announced….Sprint…has chosen not to shift gears to OC192….Sprint will move forward using the slower speed OC48 interface that it currently uses in conjunction with Ciena’s equipment.”

Sprint’s need for four-fiber bi-directional rings, as well as infrastructure spacing issues, held up OC-192 deployment in its network.

Ciena Stock Trades Halted Rosy Earnings Overshadowed by WorldCom Move, 2/2/98

“…[T]he shortfall is very likely to be offset by new business from one huge ‘potential customer’ — Bell Atlantic. He said he expects Ciena to announce a deal with that local exchange carrier shortly.”

The contract was announced the following month.

Noise Cancellation Stock Soars Intranet Technology Breakthrough, Intel Deal Drive Trading As Wall Street Takes Notice of Intranet Telephone Potential, 10/23/97, The Daily Record

“‘We haven’t experienced those kinds of [echo] quality problems with our equipment on the internet,’ said…[a] spokesman for …Sprint….[A] telecommunications research firm, said that Sprint’s comments could be misleading, however. ‘That might be a little disingenuous….I’ve heard that echo cancellers could be very big.’”

Quite an understatement

Another big win for Ciena, AT&T contract sets up Ciena/Lucent showdown, 8/18/97

“‘Pirelli’s having problems [with DWDM]’…,”, adding that the company initially enjoyed sole-supplier status for four- and eight-channel systems but hasn’t been able to keep pace with 16 channels.”

About two years later, Pirelli sold off those assets.

Center of excellence, 5/12/97, Telephony

“Fujitsu’s approach to the DSL market—allying with a smaller company with the technology—may set a precedent, he said….‘I wouldn’t be surprised if we see a lot of partnering….’”

Certainly, there became DSL partnerships between Nortel and Westell as well as Siemens & Amati (later purchased by Texas Instruments). Also, Siemens did joint development work with Adtran in the space. In addition, Lucent OEMed Orckit’s solution with at least one customer.

The great buildout Frontier selects NEC for OC-48 Sonet equipment, 3/17/97

“‘It seems to be good news for NEC, which trails Fujitsu, Lucent and Northern Telecom in Sonet sales….But I suspect NEC is giving them a really good price. I also suspect that Sprint is finishing their buildout of OC-48, and that’s NEC’s biggy customer. [NEC] needs market share in a hurry.

It is clear that the implication for NEC was that it without a dramatic reversal of circumstances, it was destined to become a bit SONET player, especially with Frontier’s propensity (which did not change with the buyout of Global Crossing — or even Global’s purchase by Level 3) to switch vendors on a dime, if the cost were lower.

WDM expands fiber’s horizons, 3/1/97, LAN Magazine

“…TDM suppliers will be under the gun to produce OC-192 systems with the features necessary to compete with WDM for the 10Gbps-and-above market. He also predicts eventual widespread deployment of WDM on OC-192 systems.”

Alcatel simplifies Sonet transition, 1/27/97

“‘FlexPoint is the same technology Alcatel uses in its digital cross-connects….There may still be some cross-competition with their own products….”

Soon after the announcement, FlexPoint seemed to disappear from the marketplace.

SuperComm 96 sparks lively interest in dense WDM, 8/1/96

“‘…It is likely that the maximum capacity on a commercially available time-division multiplexer will remain at 10 Gbits/sec for at least 10 to 15 years.’”

In 2014, about 90% of this capacity was still at 10G.

Fujitsu integrates switch and transport operations, 3/1/96

Additional indication about a future with a low amount of ATM traffic

ATM was supposed to take over the world.

Ringing out the last monopoly?, 7/25/95

Residential customers not being able to select a competitive local landline company in the next five years turned out to be true.

…AT&T Seen Picking WDM Over OC-192, New Report Says, 3/20/95, Fiber Optics News

“AT&T appears to be more interested in achieving greater capacity using WDM than in implementing an OC-192 system….”

It became apparent later that AT&T Network Systems, ATT’s “captive” vendor, was not in a hurry to develop a 10G system.

ATM Debate Continues, 3/1/93, CommunicationsWeek

“I had to laugh when I read “ATM’s Sluggish Start Dampens Expectations’ {CommunicationsWeek, Feb. 15}. After months of unrelenting hype about this new technology, suddenly you are shocked that ATM is not going to happen tomorrow. Most realistic people in the industry have always felt that ATM development will be a long process. The fact that suppliers are ‘tripping over each other to be part of the ATM vanguard’ only indicates the complexity of the new switch fabric. Manufacturers are obliged to get an early start in order to be ready when the market really takes off. There will be relatively limited deployment of ATM in the 1990s. The real question should be: Will ATM flop in the 21st century?”

ATM did flop.

AT&T AND Northern Telecom Must Move on SONET, Report Says, 9/28/92, Fiber Optics News

“[He] contends Northern and AT&T have hit substantial roadblocks since announcing strategies for future integrated SONET fiber networks within a month of each other in 1989. AT&T’s SONET product line, dubbed Service Net-2000, appears to be a ‘disparate mix of equipment offering few advancements in network architecture.’ Although Northern’s SONET product line offering, FiberWorld, seems ‘more cohesive,’ incorporating leading-edge technologies, the company is faced with the formidable challenge of moving customer thinking away from entrenched network concepts in delivering their proposed capabilities.”

Both schemes were abandoned as their main purpose was to overhang the industry with marketing concepts with little substance in order to fight off their competitors.

Take My Advice Mr. Akers, 6/17/91, InformationWeek

“The [claim] that switched data services will replace private-line services…[is erroneous]….Large companies will continue to build internal networks when that is cost-effective or when they have unique requirements.”

Of course, private line services are still quite popular today.

ISDN Still Too Expensive, 1/8/90, CommunicationsWeek

“‘According to our market research, some telephone companies are having trouble selling integrated services digital networks because of the cost. The cost of providing ISDN per line can be as much as five times the cost per line for POTS (plain old telephone service); it can be as much as 15 times more expensive for small applications….At least 30 major customers, including Ford Motor Co., have told Michigan Bell that they do not want to go with ISDN. Five years after the first application, Michigan Bell has hardly sold ISDN. Given the fact that users can get centrex for less than POTS, one can see why there is such reluctance to go with ISDN-and have the cost of telecom services increase dramatically.’”

The cost for ISDN continued to be a major prohibiting factor in its widespread use.

Fiber to the Home Will Not Take Off Before 1995, 8/8/89, PR Newswire

Despite lots of hype about FTTH being around the corner in the late ’80’s, this prediction turned out to be quite conservative.

Fiber Optic Futures, February, 1987, Photonics Spectra

“While the first gigabit fiber optic system in the US is only now being tested…, there has been discussion of systems operating in the range of 10 to 20Gb/sec by the year 2000.”

Market for digital cross-connects predicted to skyrocket by 1990, 7/7/86

“While AT&T Network Systems has dominated the digital cross-connect market to date, [we predict] competitors will attack AT&T with higher capacity systems, more up-to-date technology, lower prices, an improved delivery schedules.”

Tellabs, DSC, and Alcatel became formidable competitors.

Digital Switch Market Shakeout on the Horizon, 2/17/86, The San Francisco Chronicle

“‘There is ample evidence that GTE wants to get out of manufacturing altogether.’”

GTE gradually removed itself from equipment production starting with joint ventures.

Newsfront Suspension of Fibertrak confirms skeptics’ claims of lightwave glut, 9/1/85, Data Communications

“[S]ome analysts worry about Fibertrak’s staying power. ‘As time goes on…., it will be harder and harder for Fibertrak to proceed. Customers want carriers that will be around 10 to 15 years from now. Some may not be confident that Fibertrak will be around.’‘

Fibertrak never got off the ground.

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"I have had the pleasure to work with Mark in two different roles. The first was using Mark's services for consulting work, which was my original introduction to Mark. During this time, Mark's work was excellent. He was able to demonstrate to us the value of his market research services, complete the effort in a timely manner and "arm" myself and my team to make solid decisions that were based on the market's needs. "

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